Are Insurtech startups in Africa the future or just a one-hit wonder?

For those of you who haven’t heard the term ‘Insurtech,’ it is still considered to be in its infancy but is quickly becoming one of the fastest growing business sectors in Africa. This term is typically used to refer to companies in the Insurance-Technology sector. Similar to how Fintech was created to describe companies in the Financial-Technology sector; this new breed of business has really started to ramp up in terms of numbers and investments that are being made into these organizations.

There has been a stark rise in the number of Insurtech businesses coming to the forefront. In this post, we review some of the big names in the African Insurtech sector and examine whether they have the potential staying-power to become big businesses of the future or if they are just going to be here one day and gone the next.

Is this the beginning of something great for the Insurtech sector?

Whether or not you are a traditional follower of business innovation in Africa, there are some sectors and businesses that seem to appear from nowhere and come into the spotlight with extreme momentum. This is referred to as the Wave Effect, which ultimately peaks and then comes crashing down when the focus in the market shifts and moves elsewhere.

All around the globe, there has already been significant investment in the Insurtech sector. Pineapple is the first ever peer-to-peer Insurtech platform in South Africa and they secured R5.2 Million (approx. USD 445k) in seed funding recently from Lineas Holdings. However, they are not alone, as a recent article published by Insurtech Intelligence outlined the Top Ten Startups in Insurtech in Africa, some of which are seen as having incredibly inspiring and exciting offerings.

Does the African Insurance sector need a revolution?

The Insurance sector is perhaps one of the most traditional of industries that has so far remained relatively untouched by the hands of the data-driven innovators. The profoundly powerful impact that new data-driven platforms can have within this sector is significant, and that’s not something which we believe is going to change anytime soon.

Let’s take a quick look at how the land lies right now for those in the insurance sector. Typically, the insurance business is driven by people, lots and lots of people. From agents to analysts to adjusters and more, there are many people involved; and with so many people there is the duplication of work and an increased likelihood of errors. According to statistics, there is an average of 3 duplicated processes in every consumer insurance sale and some insurance companies still use fax machines. Many of these companies still have a tendency to work off multiple age-old systems, and in general, it’s a clunky, clumsy, costly way of doing business. The insurance sector, even to those who work within it, is perceived as confusing, complex and a little bit mysterious. Overall, it is not viewed as an easy or pleasurable experience and it can be seen as frustrating.

Simply put, there are many challenges, that are for the most part, easily solvable with the right type of technology.

These problems create the perfect storm where disruption is concerned and this paves the way for start-ups and existing businesses to make changes that will transform the way the sector operates. These changes bring about opportunities that can be capitalized on and we are already starting to see effects of this clearly in the African Insurtech sector.

The Insurtech opportunity

So, why do we feel assured that Insurtech is going to be around for some time?

Technology and Data are key drivers of our economy and they are engrained in our future. There is no going backward where this type of evolution is concerned. As consumers, we expect a fast, efficient and seamless service from the companies we deal with.

With the adoption of wearable technology on the rise, there are various insurance companies (car and health) who have already started to reward people with lower rates for ‘good behavior;’ whether this is due to them driving more carefully or adopting healthier lifestyle habits. With drone deliveries, driverless vehicles and cyber insurance all firmly set to transform our lives, these present endless opportunities for the future in this particular sector and with these, there will be new products that will come with a new set of risks.

Jamii is based out of Tanzania and is a mobile micro-health business. Through their service, families that earn less than $70 monthly are being given access to health care services from as little as $1 per month. Aerobotics in South Africa is another example of an Insurtech business that is harnessing the power of drone technologies across a number of sectors and applying aerial analytics in order to drive down the cost of crop insurance.

According to the Financial Times, a recent survey of insurers resulted in almost 75% of the respondents stating that the industry had so far failed to show any kind of leadership in digital innovation.

For insurance companies to stay relevant and in order for them to remain competitive, a change is needed and with the rise in the number of Insurtech companies in Africa, a change is most certainly on the horizon- in our opinion, it will be around for some time to come.

We move forwards after all. Once we start taking those steps and we benefit from doing so, there is no reverting to the clunky old way of doing things.